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Productivity Commission Auto Position Paper

The Australian Automotive Aftermarket Association (AAAA) has challenged the Position Paper published last Friday by the Productivity Commission as narrow in scope and negative in intent.

AAAA Executive Director Stuart Charity said this report followed the well worn path of most previous government investigations into the automotive industry.

“Once again, the opportunities in the innovative and growing independent aftermarket sector were given only superficial consideration, including the robust $ 5.2 billion a year aftermarket manufacturing segment that employs 21,000 people and earns $800 million a year in export sales,” said Stuart Charity.

“These 260 parts and accessories manufacturers operate across Australia in metropolitan and regional centres. They produce over 36% of all Australian automotive output, yet receive no government industry assistance and minimal export support, and they are not constrained by inflexible union driven enterprise agreements.

“It is time for government to understand that these businesses are expanding through high technology innovation with exports to Asia, Europe, Middle East and the USA.

“The AAAA submission to the Productivity Commission highlighted that recent Government policy actually had negative impact on the aftermarket. We submitted that effective policy specific to the aftermarket could facilitate an immediate additional $1.36 billion value to make it a $6.56 billion sector.

Narrow industry perspective
“While we are delighted that the AAAA submission was quoted regularly in the Productivity Commission’s Preliminary Report, its subsequent Position Paper fails to recognise the role the aftermarket can play in fostering a sustainable automotive industry in Australia.

“If the full growth potential of the aftermarket segment is realised, it can absorb some of the excess capacity, skills and knowledge that become available as the decline of local vehicle production plays out.

“The aftermarket segment has performed successfully under intense import pressure. Aftermarket manufacturers have been forced to move up the value chain, from service parts to high value specialty products with a technological advantage.

“This competition has created an Australian aftermarket manufacturing industry that has the right pre-conditions to be a globally competitive sector. These businesses have been successful because they made significant investments in R&D and capital, and have strong export focus.

“We need policy that promotes such investment, but at present we have an environment of disincentive. Holden’s announcement in December to cease production in Australia only adds weight to the urgency for the component industry to transition away from the vehicle maker supply chain to more sustainable sectors,” he said.

Negative view of automotive
Stuart Charity said the Federal Government has a role to play in facilitating urgent structural adjustment.

“With Ford and Holden ceasing production in Australia, and Toyota sourcing more components from offshore, their suppliers will face tough times. The AAAA believes the performance of both the vehicle makers’ supplier base and the aftermarket can be simultaneously enhanced through a holistic approach to policy setting that embraces both segments,” he said.

“By contrast, the Productivity Commission Position Paper is aggressively negative. It condemns Australia’s automotive industry to become a market of imported vehicles and imported parts.

“It is not too late for the Federal Government to establish policy settings, which recognise the inherent weaknesses and strengths of all parts of the automotive industry. Those policies must facilitate its transition to a sustainable industry,” he said.

Policy vacuum for manufacturing
The AAAA calls on the Federal Government to accept its leadership role in facilitating this urgent structural adjustment in the automotive industry. “The AAAA believes that Australian manufacturing industry as a whole desperately needs visionary policy settings from this Federal Government. We don’t need more inquiries or lectures about ‘entitlement,” said Stuart Charity.

“We do need long term policy based on independent research and advice that is designed to foster economic growth across a range of industries. We need trade agreements that deliver fair outcomes for consumers as well as Australian manufacturers.

“Such policy will enhance Australian manufacturing competitiveness and innovation, and will facilitate access to new export markets with real and sustainable growth prospects” he said.